Back in 2001, as the dotcom bubble imploded and the U.S. economy took a downward spiral, Anisha Sood, a recently hired consultant for Accenture, felt fortunate.
“There were rounds of layoffs happening and Accenture was trying to manage it well, but I got lucky because I was in healthcare,” explains Sood, who reports that other practice areas such as technology and media were not so fortunate.Read More
Seven years later, just as Sood had finished logging her first 48 hours as an investment banker with Credit Suisse, Lehman Brothers collapsed—but once more, Sood felt fortunate.
“Here again, I could credit healthcare as being the stabilizing factor, although there were no deals happening, no IPOs or M&A, for about 12 months after I started,” recalls Sood, who in the years that followed would lead a variety of health sector transactions for the bank before moving back to hometown Seattle to begin a multichapter career as a venture investor in healthcare.
“When I left Seattle in the ’90s, it was kind of a small town known for its alternative rock, and now I returned to find this bustling world of startups and spinoffs and large players that had made a reinvestment in healthcare and seeded this entrepreneurial biocommunity,” observes Sood, whose venture investing career chapter—unlike those that preceded it—appears to have opened unaccompanied by the peril of economic collapse.
There were other differences as well, for it was during Sood’s venture investing days that she first began to acquire the escalating desire to build things that over time fueled her ambitions to become a CFO.
Along the way, Sood says, she came to realize that most often it was finance that was first to expose whether or not a company was going to be successful. As she likes to put it: “Finance is the canary in the coal mine.”
According to Sood, the welfare of the bond between venture investors, boards, and entrepreneurial founders often depends on a single deliverable that is usually framed by more or less the same query: “Can you provide us with a unit economic model that shows us how profitable or sustainable your clients will be over time as you start to grow?”
It was just such a deliverable that later tripped up the management team of one of Sood’s portfolio companies.
“We realized over time that the company was not tracking toward its numbers—the incremental margin, the incremental sustainability, just wasn’t materializing, and it became clear that there was a flaw in the strategy and underlying business model for the company,” remembers Sood, who adds that the company was ultimately sold for far less than what had previously been projected by venture investors.
For Sood, the experience reveals why finance must always be the canary—and sound off with tough questions that are sometimes difficult to ask.
Says Sood: “How much do we need to pay attention to these numbers? When must we start to call it? If we let things play out, it may lead to an exit that no one wants to see.” –Jack Sweeney
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CFOTL: Tell us about First Choice Health … what does this company do, and what are its offerings today?
Sood: The focus of First Choice Health is really on improving healthcare benefits by bringing the providers of care—doctors, health systems, hospitals—closer to the payers for care. Typically, most folks think of the default payer for care as being an insurer, but in the U.S., the payers for care are really the employers for the most part. Most of us have employer-based insurance. When you go into the doctor’s office, you may pay $30 for your out-of-pocket, your copay, your co-insurance—the other $100, $150, is actually covered by the employer, yet there really is no interaction between these two parties. This is particular to healthcare. In most transaction spaces, there isn’t sort of a middleman between the purchaser and the servicer of any particular product or service.Read More
First Choice Health, at its basic level, can be the administrator of the benefit. We can provide you with a network of hospitals and providers from which you can seek care at a discount. We’ll send you your ID card. We can be involved with customer service. If you have a question about benefits, we’re going to be able to answer it. All of this. But our focus—and really where we’ve differentiated ourselves over the past few years—has been on enabling a conversation between those two parties, the providers and the payers. We’ve started to co-brand products along with our hospital system providers. We enable folks to say, for example, “Hey, you have a heavy manufacturing population, Employer X—don’t you think that we could maybe support you better by making sure that we have more robust or more targeted pain management programs that we can share with your employees?” This is all about allowing some customization and providing real value for what you’re buying around healthcare on a more individual employer basis and with a health system partner.
And then sharing this risk. If you do a really good job of going out of your way to help to manage high-cost pregnancies or manage back pain, then the value is accruing to you and should be accruing to the purchaser. So, how do we have that direct financial relationship? Historically, again, this has always gone to an insurer type of model. We’re saying, “No, no, no—let’s make this relationship a little bit tighter.”
“Finance is an art, not a science. The difference between accounting and finance is that accounting provides a snapshot of what happened in the past, while finance is something that is forward-thinking and can be wielded as a tool for your strategy’s storytelling. The better you can use this to inform how you speak about your strategy and think about future growth, the more success you will have.” –Anisha Sood, CFO, First Choice Health
First Choice Health | www.fchn.com | Seattle, WA